apply blue ocean strategy to develop new services for fsi company

In- depth interview The author has used guiding questions for in-depth interview with 2 top leader of FSI Company; The objective of interviews is to identify the company's strategy from

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 -Nguyen hung son

APPLY BLUE OCEAN STRATEGY TO DEVELOP NEW

SERVICES FOR FSI COMPANY

supervisor Prof Dr TRAN THO DAT

I would like to express my gratitude to all those who gave me the possibility

to complete this thesis

Firstly I want to sincerely thank to Board of Leader of BSNEU, lecturers, and management staffs who guide, teach, support, help me in all the time I learnt and research in the Institute Knowledge and skills I learned from this course help

me so much not only to complete this thesis but in my work and my life

I deeply indebted to my supervisor Prof Dr Trần Thọ Đạt, Vice president of National Economics University, whose help, stimulating suggestions and encouragement helped me in all the time of research for and writing of the thesis

I want to sincerely thank to BOD of FSI Technology Development and Trading Investment JSC for giving permission to commence this thesis in the first instance, providing me with the effective data

I also gratefully acknowledge the assistance from all of my colleagues at that helped to supply relevant written material and support me much for the completion

TABLE OF CONTENTS

ACKNOWLEDGEMENT 1

TABLE OF CONTENTS 2

ABBREVIATION 5

LIST OF CHARTS 6

LIST OF FIGURES 7

LIST OF TABLES 8

CHAPTER 1 INTRODUCTION 9

Rationale 9

Research Objectives 10

Research Questions 10

Research Methodology 10

1.4.1.Research process 10

1.4.2.Data collection 11

1.4.3.Data analysis 12

Research Scope 12

1.5.1.Research object: 12

1.5.2.Research scope: 12

Research Structure 12

CHAPTER 2 THE THEORETICAL BACKGROUND ON BLUE OCEAN STRATEGY 14

Nature of Blue Ocean Strategy and value innovation model 14

2.1.1.Nature of Blue Ocean Strategy 14

2.1.2.Value Innovation – The Cornerstone Of Blue Ocean Strategy 15

Tools for developing new products and services 17

2.2.1.Identify current values of the service on the market 17

2.2.2.Select new value for new products and services according to 4 actions framework 20

Conditions for deploying new services 23

2.3.1.Conditions about cognition 23

2.3.2.Conditions about Resources 24

2.3.3.Conditions about Innovation 24

2.3.4.Conditions about Political 25

CHAPTER 3 DEVELOPING NEW SERVICES FOR FSI 26

Overview Of Fsi Technology Development And Trading Investment Jsc 26

Identify current value on vietnamese office machine market 28

3.2.1.Overview of the market 28

3.2.2.Characteristics of the office machine supplying market 30

3.2.3.Current value curve of office machine supplying services on the market 35

Select new values for Fsi new services 36

3.3.1.Eliminate 37

3.3.2.Reduce 39

3.3.3.Raise 41

3.3.4.Create 44

3.3.5.Summary on value curve of the new service 47

CHAPTER 4 SOLUTIONS AND CONDITIONS FOR DEPLOYING NEW SERVICES IN FSI 49

Orientation of Fsi‘s strategy on supplying office machines 49

Solutions for implementing new services in fsi 50

4.2.1.Solution for awareness of Leaders and FSI’s staff 50

4.2.2.Solutions for optimization of resources 51

4.2.3.Solutions to save cost and expenses 53

4.2.4.Invest more to R&D activities 54

4.2.5.Other Solutions 55

CONCLUSION 56

LIST OF REFERENCES 57 APPENDICES 58

ADF Automatic Document Feeder

BOD Board Of Directors

BOM Board Of Managers

BOS Blue Ocean Strategy

CEO Chief Executive Officer

DMS Document Management System

FSI FSI Technology Development and Trading Investment

Joint Stock Company

ICT Information and Telecommunications Technology

IDC International Data Corporation

IT Information Technology

VCCI Vietnam Chamber of Commerce and Industry

VND Vietnamese Dong

LIST OF CHARTS

Chart 3.1: ADF scanners market volume (units) in 2008 – 2011 29

Chart 3.2: ADF scanners market share in 2010 30

Chart 3.3: The present strategy canvas of FSI’s office machine 36

Chart 3.4: The level of interest in the diversify of products and services 38

Chart 3.5: Important Level of payment policy 40

Chart 3.6: Important Level of product quality 42

Chart 3.7: Important Level of product quality 43

Chart 3.8: New value canvas among FSI and main competitors 48

LIST OF FIGURES

Figure 1.1: Research Process 10

Figure 2.1: Value Innovation Model in BOS 16

Figure 2.2: The four Actions Framework in BOS 21

Figure 2.3: The example of the Eliminate-Reduce-Raise-Create Grid in BOS 22

Figure 3.1: Printer market share Q III - 2010 28

Figure 3.2: Distribution Channel of Manufacturers 31

Figure 3.3: The Eliminate-Reduce-Raise-Create Grid 37

LIST OF TABLES

Figure 1.1: Research Process 10

Figure 2.1: Value Innovation Model in BOS 16

Figure 2.2: The four Actions Framework in BOS 21

Figure 2.3: The example of the Eliminate-Reduce-Raise-Create Grid in BOS 22

Figure 3.1: Printer market share Q III - 2010 28

Figure 3.2: Distribution Channel of Manufacturers 31

Figure 3.3: The Eliminate-Reduce-Raise-Create Grid 37

CHAPTER 1 INTRODUCTION

Rationale

When products and services are more and more similar, the competition between companies will base on prices and profit will more and more decrease According to VCCI (Ho Huong, www.vcci.com.vn, 2013), in 2012, there were 53,000 companies have been stopped operating in all the country, total companies stopped in 2011 and 2012 were 107,000, it equals to all companies had been stopped in 12 years before that In the IT hardware market, competition is very fierce, so creativity and innovation by a suitable strategy play an important role in deciding survival and development of each company

Entering the market of IT hardware and office machines supplying lately, in

2007, Fsi faced intense competition with many big and famous companies as Fintec, Hai Anh, Anh Ngoc… However, FSI selected different market approaching and together with the best efforts of all staffs, FSI achieved impressed business results;

4 continuous years from 2008 to 2011, the revenue increased more than 2 times per year; prestige and brand name is known by most of IT and Office equipment companies in North and Central of Vietnam

These success are important beginning and they are not big Beside that, the gross profit was more and more decreased (10% in 2008 to 5% in 2011) and in order to keep the company developing in the long-term, strategy analysing and building is extreme important mission for BOD of FSI included the author

Although the competition is very fierce especially competing head by head but with the annual growth rate more than 25%, offices machines market is a high potential cake and profit will be the reward for companies having smart and efficient strategy Those are main reasons that the author has chosen the research: " Apply blue ocean strategy to develop new service for FSI company” as the subject of the thesis

Research Objectives

The thesis includes these objectives:

 Identify current values in supplying office machine service

 Analyze current values that FSI providing to customers in supplying office machines service

 Apply four actions framework of BOS to develop new service for FSI

 Analyze conditions and recommend solutions for FSI implementing the new service

Research Questions

- What is the current values of supplying office machine service?

- What is the current values of FSI in supplying office machine service?

- How does FSI apply BOS to create new service and what is the new service?

- What is recommendation for FSI implementing new services?

Research Methodology

1.4.1 Research process

Figure 1.1: Research Process

Source: the Author

1.4.2 Data collection

- Secondary data

Existing secondary data is collected for analysis purposes In this study, the secondary data is gathered from internal sources of FSI used for the thesis, such as: previous survey results of FSI, new products or services statements and reports, company profile, website, annual and monthly reports Statistic figures are collected, classified, analyzed to be used for the research

Besides that, public information is also gathered to make the analysis more convincing Based on public information both in Vietnam’s IT industry on the whole, the author has tried to study through Internet, via newspapers, magazines or other people’s research relating to IT distribution business in Vietnam market

• Questionnaire delivery methods: answers are collected by 2 methods: online survey (80%) and direct collected (20%)

• Questionnaire: (Appendix 01)

The goal of the survey is to determine which factors affect to values customers receive, how are they important and see how well the current products and services meet customers’ satisfaction Besides that, one important goals of customer survey is to recognize the major needs and wants of customers for new

products and services in the coming time Base on the target, content of questionnaires is focus on what products and services they are using, which factors they wonder when they choosing the goods, the way they want for delivery services, payment services, support after sales…

With 60 questionnaires issued, the author got back 45 ones and they are the sources for the analysis

In- depth interview

The author has used guiding questions for in-depth interview with 2 top leader of FSI Company;

The objective of interviews is to identify the company's strategy from the CEO level and operational strategies for each individual department, aims to better understand the company's strategy give ocean blue strategy for office machines supplying, it must be consistent with overall strategy and core values of FSI

The structure of research includes 4 main chapters:

Chapter 1: Introduction

Chapter 2: The theoretical background on blue ocean strategy

Chapter 3: Developing new services for FSI

Chapter 4: Solutions and conditions for deploying new services in FSI

Company

CHAPTER 2 THE THEORETICAL BACKGROUND ON

BLUE OCEAN STRATEGY Nature of Blue Ocean Strategy and value innovation model

1

2

2.1

2.1.1 Nature of Blue Ocean Strategy

Blue ocean strategy is a strategy that goals are archived by building, implementing and develop a new market in which there are no competition or competition is not needed Normally, a space of market is formulated by 2 oceans: red ocean and blue ocean

Red ocean is the market which it’s boundary is defined and companies win

by competing and knock out the competitors In red ocean, strategy is either increasing value or cost reducing Bargaining to enter the market is low, there are more and more companies joining and profit decreased

Blue ocean is a new market which boundary is not defined, it is formed by new demand and high potential, high profit In blue ocean, strategy is deploying both innovation and cost reducing In the blue ocean, competition is not needed because rules are not formulated

Table 2.1: Red Ocean Versus Blue Ocean Strategy

Red Ocean Versus Blue Ocean Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value-cost trade-off Break the value-cost trade-off

Align the whole system of a firm’s

activities with its strategic choice of

differentiation or low cost

Align the whole system of a firm’s activities in pursuit of differentiation and low cost

- Not beat the competitors, BOS make competition become not necessary.

- Not fulfil current demand, it create and take new demand

- Not try to balance value and cost The strategy break the balance of value and cost

- Don’t set all activities of the company in the strategy to archive differentiation or low cost, the strategy set all activities in the strategy that follow both differentiation and low cost

2.1.2 Value Innovation – The Cornerstone Of Blue Ocean Strategy

What consistently separated winners from losers in creating blue oceans was their approach to strategy The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark instead, they followed a different strategic logic that we call value innovation value innovation is the cornerstone of blue ocean strategy We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening

up new and uncontested market space

Value innovation places equal emphasis on value and innovation Value without innovation tends to focus on value creation on blue ocean strategy an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace Innovation with-out value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for in this sense, it is important to distinguish between

value innovation as opposed to technology innovation and market pioneering Our study shows that what separates winners from losers in creating blue oceans is neither bleeding-edge technology nor “timing for market entry.” sometimes these exist; more often, how-ever, they do not Value innovation occurs only when companies align innovation with utility, price, and cost positions if they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition importantly, value innovation defies one of the most commonly accepted dogmas of competition-based strategy: The value-cost trade-off it is conventionally believed that companies can either create greater value to customers at

a higher cost or create reasonable value at a lower cost Here strategy is seen as making a choice between differentiation and low cost In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously

Figure 2.1: Value Innovation Model in BOS

(Sources: The BOS)

As shown in Figure 2.1, the creation of blue oceans is about driving costs down while simultaneously driving value up for buyers This is how a leap in value for both the company and its buyers is achieved Because buyer value comes from the utility and price that the company offers to buyers and because the value to the company is generated from price and its cost structure, value innovation is achieved only when the whole system of the company’s utility, price, and cost activities is properly aligned It is this whole-system approach that makes the creation of blue oceans a sustainable strategy Blue ocean strategy integrates the range of a firm’s functional and operational activities

In contrast, innovations such as production innovations can be achieved at the subsystem level without impacting the company’s overall strategy An innovation in the production process, for example, may lower a company’s cost structure to reinforce its existing cost leadership strategy without changing the utility proposition of its offering Although innovations of this sort may help to secure and even lift a company’s position in the existing market space, such a subsystem approach will rarely create a blue ocean of new market space

In this sense, value innovation is more than innovation It is about strategy that embraces the entire system of a company’s activities Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves Absent such an integral approach, innovation will remain divided from the core of strategy

Tools for developing new products and services

2.2.1 Identify current values of the service on the market

To identify values of office machine supplying service, we will analyze some characteristics of office machine and office machine supplying service as follow

Characteristics of Office machines:

Office machine is a technological product, certain highly technical complex

so before buying, customers usually careful consider before making decision Apart from common printers is relatively cheap prices, professional and high speed scanners, printers, copiers are quite expensive priced and is an important asset if customers buy products, so customers tend selection of branded products, good quality, attentive service warranty

Also during office use, users often have to replace the consumable supplies such

as toner, drum, brushed or repair the damage after the warranty period, so the technical service after the sale is a very important part that creating value for customers

By analyzing characteristics and roles of Suppliers, customers, competitors, new entrants and substitute products, the author rise factors affecting to customers’ value below:

Prices

Buyer power affects profitability of enterprises in the industry by depressing prices or asking high quality (Porter, 1979) Because almost products provided to the market are made by some manufacturers and the quality is similar, time for warranty is the same, so price is an important factor when customers decide to buy from one supplier or other

Value about Payment Policy

With the same price and promotion program, payment conditions or debt policy is an important factor affect to customers’ buying decision Sometimes, customers prefer buying high price with debt rather than buying low price with cash because they can use cash receiving from their customers after selling and pay to suppliers without issuing their money

Diversify of products and services

Diversity of products and services bring convenient for customers because they can easily choose every products and services they need in one place from one company

Value about Quality of products

Quality of product and services is of course one of most important factors that customers consider when they choose suppliers Although most of suppliers buy product from the same manufacturers, same sources of goods but quality of product sold to the market should different because their management procedures are different, for example, long time stock or quick test may reduce quality of office machine

Value about Warranty services

Office machines are technology products require user having basic knowledge and experience to use, warranty services are essential services that customers wonder when buying products Warranty services include the time of warranty, place of warranty, product swapping policy, conditions for warranty

Value about Delivery services

Deliver products to the customer or called outbound logistics is one of 5 primary stage bring value to the customer Fast and in time delivery is the expectation of almost customers

Value about technical support services

Office machines are specialize electronics equipment made by modern, complicated and high exactly procedures In the equipment’s life cycle, to keep quality of products stability suppliers usually provide maintenance services as: inspection test, consult and replace spare component These services help office machines always work at the highest efficiency with the lowest cost

In the warranty time, all equipment failure will be fixed free but after this time, customer need to use charged repair services The services keep the life cycle

of the machine longer and save money for customers

Value about Customer care services

Customer services include answering all customers’ reply, support customer, activities to increase customers’ satisfaction and retain their loyalty It also includes customer services at contact points (authorize store, authorized warranty center…)

Value about Prestigious of supplier

If all values above are similar between suppliers, customers will choose base

on suppliers prestigious and reputation Prestigious make customers sure about quality of product and services and believe in all commitment from sellers

2.2.2 Select new value for new products and services according to 4 actions framework

To reconstruct buyer value elements in crafting a new value curve, BOS has developed the Four actions framework As shown in figure 2.2, to break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry’s strategic logic and business model:

• Which of the factors that the industry takes for granted should be eliminated?

• Which factors should be reduced well below the industry’s standard?

• Which factors should be raised well above the industry’s standard?

• Which factors should be created that the industry has never offered?

Figure 2.2: The four Actions Framework in BOS

(Sources: The BOS)

The first question forces us to consider eliminating factors that companies in your industry have long competed on Often those factors are taken for granted even though they no longer have value or may even detract from value Sometimes there

is a fundamental change in what buyer’s value, but companies that are focused on benchmarking one another do not act on, or even perceive, the change

The second question forces us to determine whether products or services have been overdesigned in the race to match and beat the competition Here, companies over serve customers, increasing their cost structure for no gain

The third question pushes us to uncover and eliminate the compromises your industry forces customers to make The fourth question helps you to discover entirely new sources of value for buyers and to create new demand and shift the strategic pricing of the industry

It is by pursuing two first questions (of eliminating and reducing) that you gain insight into how to drop company’s cost structure The result is mounting cost structures and complex business models The second two factors, by contrast, provide insight into how to lift buyer value and create new demand Collectively, they allow the company to systematically explore how you can reconstruct buyer value elements across alternative industries to offer buyers an entirely new experience, while simultaneously keeping the cost structure low Of particular importance are the actions of eliminating and creating, which push companies to go beyond value maximization exercises with existing factors of competition Eliminating and creating prompt companies to change the factors themselves, hence making the existing rules of competition irrelevant.

The Eliminate-Reduce-Raise-Create Grid:

There is a third tool that is key to creation of blue oceans It is a supplementary analytic to the four actions framework called the eliminate-reduce-raise-create grid (see figure 2.3) The grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve

Eliminate-Reduce-Raise-Create Grid: The Case of [yellow tail]

EliminateEnological terminology

and distinctions

Aging qualitiesAbove-the-line marketing

RaisePrice versus budget

winesRetail store involvement

ReduceWine complexity

Wine rangeVineyard prestige

CreateEasy drinkingEase of selectionFun and adventure

Figure 2.3: The example of the Eliminate-Reduce-Raise-Create Grid in BOS

(Sources: The BOS)

By driving companies to fill in the grid with the actions of eliminating and reducing as well as raising and creating, the grid gives companies four immediate benefits:

• It pushes them to simultaneously pursue differentiation and low costs to break the value-cost trade-off

• It immediately flags companies that are focused only on raising and creating and thereby lifting their cost structure and often over engineering products and services - a common plight in many companies

• It is easily understood by managers at any level, creating a high level of commitment in its application

• Because completing the grid is a challenging task, it drives companies to strongly inspect every factor the industry competes on, making them discover the range of implicit assumptions they make unconsciously in competing

Conditions for deploying new services

2.3.1 Conditions about cognition

In many turnarounds and corporate transformations, the hardest battle is simply

to make people aware of the need for a strategic shift and to agree on its causes Most CEOs will try to make the case for change simply by pointing to the numbers and insisting that the company set and achieve better results: “There are only two performance alternatives: to make the performance targets or to beat them.”

But as we all know, figures can be manipulated Insisting on stretch goals encourages abuse in the budgetary process This, in turn, creates hostility and suspicion between the various parts of an organization Even when the numbers are not manipulated, they can mislead Sales people on commission, for example, are seldom sensitive to the costs of the sales they produce

What’s more, messages communicated through numbers seldom stick with people The case for change feels abstract and removed from the sphere of the line managers, who are the very people the CEO needs to win over Those whose units are doing well feel that the criticism is not directed at them; the problem is top management’s Meanwhile, managers of poorly performing units feel that they are being put on notice, and people who are worried about personal job security are more likely to scan the job market than to try to solve the company’s problems

2.3.2 Conditions about Resources

After people in an organization accept the need for a strategic shift and more

or less agree on the outlines of the new strategy, most leaders are faced with the stark reality of limited resources Do they have the money to spend on the necessary changes? At this point, most reformist CEOs do one of two things Either they trim their ambitions and demoralize their work force all over again, or they fight for more resources from their bankers and shareholders, a process that can take time and divert attention from the underlying problems That’s not to say that this approach is not necessary or worthwhile, but acquiring more resources is often a long, politically charged process

2.3.3 Conditions about Innovation

To reach your organization’s tipping point and execute blue ocean strategy, you must alert employees to the need for a strategic shift and identify how it can be achieved with limited resources For a new strategy to become a movement, people must not only recognize what needs to be done, but they must also act on that insight in a sustained and meaningful way

How can you motivate the mass of employees fast and at low cost? When most business leaders want to break from the status quo and transform their organizations, they issue grand strategic visions and turn to massive top-down mobilization initiatives They act on the assumption that to create massive reactions, proportionate massive actions are required But this is often a cumbersome,

expensive, and time-consuming process, given the wide variety of motivational needs in most large companies And overarching strategic visions often inspire lip service instead of the intended action

2.3.4 Conditions about Political

It is not always true that: Youth and skill will win out every time over age and treachery Even the best and brightest are regularly eaten alive by politics, intrigue, and plotting Organizational politics is an inescapable reality of corporate and public life Even if an organization has reached the tipping point of execution, there exist powerful vested interests that will resist the impending changes The more likely change becomes, the more fiercely and vocally these negative influencers—both internal and external—will fight to protect their positions, and their resistance can seriously damage and even derail the strategy execution process

CHAPTER 3 DEVELOPING NEW SERVICES FOR FSI Overview Of Fsi Technology Development And Trading Investment Jsc

 Supply professional scanners

 Supply services and solution for document digitalizing

 Supply printers, fax, copiers

- Website: fsivietnam.com.vn - sohoatailieu.vn

FSI Technology Development and Trading Investment Joint Stock Company

is one of the leading enterprises in supplying office machines such as photocopy machines, printers, scanners, fax machines, etc from Canon, HP, Brother, Kodak, Epson… which are branded in Vietnam In accordance with the socio-economic development, increasing demand of office machines, and together with considerable effort of our staff, we have created our prestige, brand name, and got a foothold in the office machine supply market

In order to gain the above achievements, FSI has been gone through important turning-points below:

6th Nov 2007 : Established FSI Technology Development and Trading

Investment Joint Stock Company

In April 2008 : Supply: printers, copiers, fax

In May 2009 : Supply Kodak high-speed scanners FSI is exclusive

Golden Partner of Kodak scanner in the North and Central of Vietnam

In October 2009 : Supply technical services for printers, copiers, fax,

scanners

In Feb 2011, : Supply all copiers, printers, fax, scanners for VPBank

and MBank in all of their branches in VietnamAugust 2012 : Exclusive Supply Plustek scanner in Northern and

Central of Vietnam

Vision

FSI become of famous Technology Companies to be listed in VNR500 in

2015 Revenue is more than 300 billion VND

Business theory - Core values

- Try the best for our target and clients’ success;

- Be creative in both thinking and action;

- Be professional from attitude to technique and commitment;

- Coordinate in a methodical way, complied with benefit of clients, staff, shareholders, partners, and community

Some different of FSI in compare with competitors

- 6 years experiences in office machines distribution market

- Exclusive distributor of Plustek scanners, Kodak scanners in northern market

- Authorized dealer of Canon, HP international

- One of few Companies went ahead in investing and business in document digitalizing solution

Identify current value on vietnamese office machine market

3.2.1 Overview of the market

There are many kinds of office machines in the market, but in scope of this thesis, we only mention 3 types: printers, copiers and scanners These machine help users to print document, copy, store, manage, and share with each other easily Business nowadays is using many document, profile for communicating and transaction and these office machines help companies making an automatic, professional and efficiency working environment

In recently years, Vietnamese economics develop fast(average >6% from

2005 to 2011), there are many new companies, offices, organizations launched so demand for office machine is high Beside that, with developing of technology, price of printers, copiers, scanners are more and more cheaper so almost offices, companies have used these machines for daily working

In the printers market, Now there are 3 main manufacturer: Canon, Hp, Xerox, they hold more than 90% market share(Lan Ca, 2010) Beside these brand, Epson, Brother, Samsung, Panasonic, Lexmark, Ricoh… are also known by most of users Printer market in Vietnam grew fast, about 20% in period of 2005 – 2010 In

2006 total printers sold out are 260 000 units The grow rate of this market in period

of 2010 -2015 is about 10% In 2011 total printers sold out are about 360 000 units

Figure 3.1: Printer market share Q III - 2010

(Source: IDC)

For a long time, The copiers market are hold by 4 big brand Xerox, Ricohn, Sharp and Canon In office machine, copiers are the highest cost product and the most complex technical require, so when buying, customers normaly consider carefully about prestigious of brands and suppliers

Table 3.1: Copier market Volume 2011

No Brand Number of units Share by unit

Chart 3.1: ADF scanners market volume (units) in 2008 – 2011

(Source: IDC)

Chart 3.2: ADF scanners market share in 2010

(Source: IDC)

3.2.2 Characteristics of the office machine supplying market

All of famous brand name and many distributors play on the market

All of office machine brand names are foreign brand, when entering the market, they have to setup distribution channel to provide products to end users Normally they choose one or some local companies and set them as exclusive or authorized distributor in Vietnam market, all products sold in the market will be imported and distributed through the distributors To provide to many levels of users spread all the country, the distributors setup their distribution channel include retailers and dealers in all the market, creating full distribution channel as below

Figure 3.2: Distribution Channel of Manufacturers

(Source: Author Research)

Table 3.2: Exclusive and Authorized Distributors in Vietnam

No Manufacturer Products Num

of Dis Name of distributor

1 Canon Printers, Scanners

and Copiers 1 Công ty Lê Bảo Minh

2 HP Printers and Scanners

4

FPT, Digiworld, Esys, AVNET, Tân Việt

3 Epson Printers, Scanners 1 Công ty TNHH TM Ðồng Nam

4 Brother Printers, Scanners 3 Sao Nam, Viễn Sơn, Silicom

5 Fujitsu Scanners 2 Mitec, Fujitsu Việt Nam

6 Kodak Scanners Digital Solution Global

11 Ricoh Printers, Copiers 1 Công ty Cổ phần Siêu Thanh

12 Gestetner Copiers 1 Công ty TNHH Nhất Vinh

13 Konica-Minolta Copiers 1 Công ty TNHH Hợp Thanh

14 Kyocera Mita Copiers 1 Công ty TNHH Thanh Nam

15 Sharp Copiers 1 Công ty Thái Việt

(Source: Author Research)

Price competition so high

Users

Authorized Distributor

Users

Now, buying an office machine is very easy for any users, they can chose themself in electronics and IT shopping Mall, call to one of local suppliers or simple chose on the commercial website… with all kind of products available.

Each manufacturer require authorized distributor listing price policies for dealers and end users in all the distribution Chanel Dealers buy products form distributors with a fixed prices according to the policy but when dealers sell products to end users, the prices are different between dealers and different in each market region Although distributors require authorized dealers sell with listed prices but under the pressure of competition dealers down the prices by many ways: discounting, promotion, free services included… some online sales companies utilize low cost of online marketing sell products with very low price make the price competition more seriously

Three years ago, gross profit for retailers in this business can be 15-20%, now gross profit only 8 -10 % and even smaller if online selling

Companies sales office machine think that they can sell product cheap to expand the market share and then they supply ink, spare part and technical services for profit but the fact is not easy like that

Fast expanding of electronics and IT supermarket

5 years ago, office machines and IT equipment is only showed and sold in IT companies but now customers can view and buy them in any electronics and IT supermarket with floors up to thousands square meters At the end of 2012, Hanoi has more than 20 big electronics and IT supermarkets placed all the districts include: Tran Anh (4 places), Media mart (6 places), Pico (4 places), Hanoi Computer (3 places), Phuc Anh (5 places), Ben (3), Top care ( 3 places)… advantages of the supermarket are full kinds of products, professional shopping spaces, convenience services for payment and delivery and many attractive promotion programs in all quarters